The GST Council has recommended changes to enforcement provisions that could reduce certain penalties, narrow the circumstances in which goods in transit are inspected and standardise procedures for tax notices and appeals.
The proposals are subject to the required legal amendments and notifications. Existing provisions continue to apply until the changes take effect.
FAQs
Has the GST Council proposed removing GST officers’ arrest powers?
Yes. The Council has recommended omitting Section 69 of the Central GST Act, which deals with the power to arrest in specified cases. Vivek Jalan, Partner at Tax Connect Advisory Services, said the proposal signals a shift towards intelligence-led and technology-enabled enforcement. Ankit Patel, Co-Founder and Partner at Arunassets Investment Services, said removing the arrest provision would not end tax enforcement, as investigations and recovery of tax and penalties could continue under the applicable law. The proposal should not be interpreted as the removal of all enforcement powers available to tax authorities.
Will the prosecution threshold under GST increase?
The Council has recommended raising the prosecution threshold from ₹1 crore to ₹5 crore and rationalising punishments under the law. Ranjeet Mahtani, Partner at Dhruva Advisors, said the enforcement proposals need to be viewed alongside the wider changes recommended for compliance and refunds. Jitendra Motwani, Partner – Tax Practice at Trilegal, said the proposed changes to enforcement and refund procedures are relevant to businesses’ dealings with the GST system. The revised threshold will depend on the relevant legal amendments coming into effect.
Could GST penalties and show-cause notices become lower?
The Council has proposed reducing the general penalty ceiling under Section 125 from ₹25,000 to ₹10,000. It has also recommended a minimum threshold of ₹10,000 in combined CGST, SGST, IGST and cess amounts for issuing show-cause notices. Under the proposal, pending notices and appeals below this threshold would be treated as though the threshold had applied when they were issued, once the provision becomes effective. In specified non-fraud cases, a reduced penalty of 5% is proposed where tax and interest are paid within 30 days under Section 73 or within 60 days under Section 74A of the adjudication order. The proposal also removes the minimum ₹10,000 penalty in non-fraud cases. For appeals involving only a penalty, the pre-deposit is proposed to be capped at ₹40 crore in total, comprising ₹20 crore each for CGST and SGST/UTGST.
What changes are proposed for inspection of goods in transit?
The Council has recommended that goods in transit be intercepted only where there is specific intelligence, with authorisation from an officer not below the rank of Joint Commissioner. As a general rule, inspection and action involving detention or seizure would be handled in the state where the supplier or recipient is located or registered, rather than by states through which the goods are merely passing. Exceptions are proposed in cases such as the absence of an e-way bill or documents establishing the origin or destination of the goods. The Council has also recommended that confiscation under Section 130 should not apply to goods or conveyances in transit. Sudipta Bhattacharjee, Partner – Indirect Taxes at Khaitan & Co, said safeguards in enforcement procedures are important when changes are made to how tax authorities exercise their powers. Mayank Jain, Partner at Khaitan & Co, said precise legal drafting is important, particularly where changes affect businesses’ compliance obligations and tax-credit claims. Brijesh Kothary, Partner at Khaitan & Co, said enforcement and procedural changes have practical implications for businesses.
Will GST notices and appeal procedures become more standardised?
The Council has recommended standardised guidance for demand notices, adjudication and appeal orders, including safeguards relating to natural justice and personal hearings. It has also proposed an objection mechanism and personal hearing in cases involving the blocking of input tax credit under Rule 86A. Dilip B. Desai, Chairman of DHC | Desai Haribhakti, said proportionate enforcement and simpler compliance procedures are important for businesses. Manoj Mishra, Partner and Tax Controversy Management Leader at Grant Thornton Bharat, said predictable procedures matter for businesses dealing with tax disputes.
When will the proposed GST enforcement changes take effect?
The recommendations are not yet equivalent to changes in the law. Their implementation will depend on the relevant legal amendments, notifications and effective dates. Until the changes take effect, businesses must continue to comply with the existing statutory provisions and procedures. They should not assume that the proposed lower penalties, higher prosecution threshold or restrictions on transit inspections are already in force.